Behind Battle Over Debt, a War Over Government

WASHINGTON — The endgame in the fight to increase the nation’s debt limit has only begun, but intense exchanges this week between the two parties have made it clear that this is not so much a negotiation over dollars and cents as a broader clash between the two parties over the size and role of government.

Mandel Ngan | AFP | Getty Images

Barack Obama meets for budget talks with congressional leaders July 10, 2011 in the Cabinet Room of the White House in Washington, DC, including House Minority Leader Rep. Nancy Pelosi (L), and House Speaker John Boehner.

What makes a bipartisan “grand bargain” so elusive is less the budget numbers, on which compromise could be in reach, than each side’s principles, which do not lend themselves to splitting the difference. President Obama wants deficit reduction, including tax increases for wealthier Americans and corporations. Congressional Republicans, prodded by a cadre of junior lawmakers, want a vastly smaller government constrained by lower taxes. The two are not the same thing.

Mr. Obama will make his case on Friday in a White House news conference, his third in just two weeks.

CNBC and CNBC.com will carry the event live, beginning at 11:00 a.m. ET.

However this showdown is settled, it seems increasingly likely to define not only the legislative record of this Congress, divided between a Republican-controlled House and a Democratic-controlled Senate, but also the 2012 elections and Mr. Obama’s prospects for a second term.

The two sides met for less than two hours at the White House on Thursday, even as attention appeared to shift away from the prospect of a bipartisan budget agreement to the likelihood of a backup plan to raise the debt ceiling before the Aug. 2 deadline.

Having discussed spending cuts in past White House meetings, the negotiators considered the administration’s proposals for raising taxes, which Republicans have vowed to oppose. Mr. Obama previously had said they would meet again on Friday to decide whether they could reach a deficit-reduction deal; if not, they would spend the weekend negotiating a way to raise the $14.3 trillion debt limit , and defer the bigger budget-cutting clash.

Instead, at the end of Thursday’s session, he told the lawmakers to try to work something out and be ready for his summons to a weekend meeting.

Underlying the budget drama between the White House and Congressional Republicans is another compelling drama among Republicans, which exposes an ideological and generational gap. On one side are older, more senior conservatives like the two top leaders, Speaker John A. Boehner and Senator Mitch McConnell, the minority leader, who remember the budget fights and Republican setbacks of the 1990s and want some deal.

On the other are the proudly uncompromising junior lawmakers, many of them Tea Party sympathizers, whose ranks were so inflated by Republican gains in the midterm elections. Representative Eric Cantor of Virginia, the House majority leader, has emerged as their standard bearer, debating Mr. Obama in the White House sessions and then boasting of it afterward.

Senator John McCain of Arizona, one of the older generation, reflected the divide in an interview Thursday on Bloomberg TV.

“I think Eric Cantor is carrying out the mandate of last November, which was to stop mortgaging our children’s futures, while the president keeps talking about spending more money,” he said.

Mr. McCain then endorsed, as Mr. Cantor and most House Republicans do not, Mr. McConnell’s proposal to empower Mr. Obama to raise the debt limit through the 2012 elections in three stages, without prior approval of deep spending cuts.

Mr. McCain, mindful of the Republican defeat in a 1995 budget showdown with President Bill Clinton, said the McConnell proposal would absolve Republicans of blame for a default. “But, it is the last option after we have explored everything else, and, frankly, I hope my colleagues have not forgotten what happened in 1995,” he said.

Republicans say the collisions between Mr. Cantor and Mr. Boehner are indicative of Mr. Cantor’s efforts to stay ahead of potential rivals for the speakership someday in keeping the allegiance of rank-and-file House Republicans.

Mr. Cantor helped torpedo behind-the-scenes discussions between Mr. Boehner and Mr. Obama. But now Mr. Obama, who earlier this year urged Congress to increase the debt limit without a companion measure for long-term budget cuts, has emerged to press for greater deficit reduction than Republicans are.

That is because he demands a “balanced package” of both spending cuts and tax increases on the wealthy and corporations, while Republicans reject any new tax revenues.

Republicans have shown that their higher priority is not lower deficits, as it was for the party through most of the last century, but a smaller government. House Republicans in the spring passed a plan that would not balance the budget for three decades despite deep cuts in Medicare and Medicaid — largely because it also deeply cut taxes, adding debt.

For Republicans, “reducing the deficit implies tax increases, or the possibility of tax increases, and that’s not something they want to do under any circumstances because it doesn’t suit their political needs,” said Stan Collender, a longtime federal budget analyst and a partner at Qorvis Communications.

The party’s dynamic in the debt talks reflects the culmination of a 30-year evolution in Republican thinking, dating to the start of President Ronald Reagan’s administration. The change is from emphasizing balanced budgets — or at least lower deficits — to what tax-cutting conservatives have called “starve the beast,” that is, cut taxes and force government to shrink.

The starve-the-beast philosophy is even more problematic now because the population is aging as baby boomers retire even as medical costs keep rising — a combination that is driving the projections of an unsustainably growing federal debt.

While the new-generation Republicans venerate Mr. Reagan, those who were in Congress when he was president say he would not understand their refusal to compromise on a package of the size Mr. Obama proposes.

“He had a rule: If you can agree on 80 percent, take it,” said Alan K. Simpson, who was the second-ranking Senate Republican leader back then. “He raised taxes 11 times in eight years,” Mr. Simpson added. “He did it to make the country run.”

Almost lost in the tax debate with Republicans is how much Mr. Obama has conceded to them this year on spending cuts, including for those entitlement programs Democrats favor.

“He believes that we have now in front of us the potential to do something big — the holy grail,” the White House press secretary Jay Carney said.